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MTrading Team • 2023-04-19

Gold drops as US Dollar cheers risk aversion, China optimism fades

Gold drops as US Dollar cheers risk aversion, China optimism fades

After a few days of cautious optimism, the risk profile worsens early Wednesday as headlines surrounding China, the US and Russia weigh on sentiment. The same joins hawkish Fed bets to underpin the US Dollar rebound.

With this, the prices of Gold and Crude Oil drop while antipodeans also decline while justifying a risk-off mood.

It’s worth noting, however, that upbeat UK inflation data allow GBPUSD to battle with the firmer USD whereas the USDJPY leads the G10 currency losers versus the US Dollar.

Furthermore, US stock futures snap a three-day uptrend while equities in the Asia-Pacific zone grind lower. That said, the shares in Eurozone and the UK also print minor losses during the initial hour.

On a different page, the US Dollar strength joined a spike in Ethereum fees and concerns about electricity bills amid a jump in mining to weigh on the BTCUSD and ETHUSD.

Following are the latest moves of the key assets:

  • Brent oil reverses the previous day’s bounce off monthly low while falling to $84.20 at the latest.
  • Gold price also declines to $1,992 while marking 0.62% intraday loss as we write.
  • USD Index prints mild gains as buyers approach 102.00 level as we write.
  • Wall Street closed mixed while equities in the Asia-Pacific region remain pressured. Further, shares in Europe and the UK print mild losses during the initial hour.
  • BTCUSD and ETHUSD drop to around $30,100 and $2,070 at the latest.
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Risk-off mood favors US Dollar

China’s alleged role in the Russia-Ukraine war and the likely invasion of Taiwan, not to forget fears that the dragon nation is up for roiling the Western infrastructures with its technological advancements, everything contributes to the sour sentiment on early Wednesday.

Adding strength to the downbeat risk profile could be the hawkish comments from the Fed policymakers and upbeat UK inflation data, both of which fuel hawkish central bank concerns. Additionally, fears of a recession are back on the table amid recently downbeat statistics and fears of higher rates for a long.

Gold price fails to justify its haven status as yields recover and allow the US Dollar to rebound. Further, downbeat concerns over China, as well as doubts about the dragon nation’s economic growth despite the recently upbeat data from Beijing, also weigh on the Gold price.

Elsewhere, looming regulations on the crypto and jump in the cost portion, as well as the environmental concerns, exert downside pressure on the BTCUSD and ETHUSD, especially amid a firmer US Dollar.

  • Strong buy: USDJPY
  • Strong sell: ETHUSD, GBPUSD
  • Buy: USD Index, USDCAD, Nasdaq, EURUSD
  • Sell: DAX, FTSE 100, gold, BTCUSD, AUDUSD

Risk catalysts

While the Fed Beige Book and final readings of the European inflation decorate today’s calendar, risk catalysts will be key to watching for clear directions amid the risk-off mood. Should the sour sentiment join hawkish Fed bets to keep the yields high, the US Dollar can extend the latest run-up and drown the Gold price, as well as other commodities and Antipodeans.

May the trading luck be with you!